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Currency and Trade Implications: Border Adjustment Tax Reforms and the North American Free Trade Area

Abstract

With the failed legislative attempt to dismantle Obamacare, the focus on tax reforms may now be justified. Criticisms have been directed at President Trump for elaborate words rather than practical demonstration. Whilst having promised to “Clean the Swamp” – a statement directed at the Washington Establishment, he has also been criticized for implementing tax plans aimed at favoring the richer classes and particularly business affiliates. So much that his tax reforms plans have been dubbed “The Art of the Lie”. This chapter aims to highlight progress which has taken place since the Trump administration resumed office and also seeks to evaluate whether the Trump administration can prove its critics wrong. With other investigations of foreign involvement in the 2016 Presidential elections still looming and hovering around, the President requires more concentration and time to focus on legislative Bills – a precious resource which contributed to his failed attempt to introduce his healthcare bill.

Introduction

With a new US administration and Presidency, increased interest in US- China and global diplomatic relations are not only attributed to ongoing dynamics and exchanges between the incoming Presidency, China and Taiwan, but also to implications from a possible fall-out from the Trans-Pacific Partnership – an agreement which could also impact the United States’ negotiating and economic influence, association and relations with current parties to the Agreement – as well as its position, impact and trade links in the Pacific Region.

Kennedy’s “Essential Negotiation” (2004) explores various negotiation techniques and models which are likely to impact trade deals and negotiation outcomes – some of which include:

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Zero Sum Model: “Jargon from Game Theory: What You Gain, They Lose”.

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Zeuthen’s Conflict Avoidance Model: A model which, in contrast to the zero sum model where a dilemma (or conflict scenario) is encountered, compares the gains likely to be made by accepting what is on offer with the net gains which are likely to generate from a conflicting zero sum position.

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Win Some–Lose Some Model.

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Win-Win Model.

This chapter explores and investigates how strategic associations, alliances and environmental influences – amongst other factors could hugely impact the outcome of trade and economic negotiations – as well as applicable models and techniques that are likely to feature in such scenarios. By way of reference to current global dynamics and selected ongoing trade agreements, it also highlights and proposes possible models whereby optimal trade negotiation outcomes can be achieved.

Given the current President’s negotiation skills and expertise in business deals, it will be interesting to see what models or techniques of negotiation are likely to feature prominently in present and future global economic, trade – as well as environmental agreements.

The Trans-Pacific Partnership Agreement (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) are not only distinguished as regional agreements which exist and operate on a greater scale and magnitude than the North American Free Trade Agreement, but also considered to be different from other previous and several trade agreements by virtue of other developments which have taken place since the introduction of the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO). Such distinguishable features include the following (O’Grady, 2016):1

The notion that primary concerns of trade agreements have shifted from tariffs and quotas (the traditional concerns of trade agreements), to issues such as the harmonization of national and regional regulations.

The relevance and importance of harmonization of national, regional – as well as transatlantic regulations and agreements will be considered to a greater extent under part two of this volume.

Further, he adds, benefits such as efficiency gains, an attribute – in addition to harmonization of regulations, have also been confirmed by sources such as the OECD - to the extent that it is estimated the TTIP alone would “create $1.1 trillion in efficiency gains for the U.S. and Europe and that corporations would be able to work with a unified set of regulations that would make trade easier and expand markets.”